FTP 2023

“RE-WISE” GST & CUSTOMS
SEGMENT - 31
SEGMENT - 31
FOREIGN TRADE POLICY
Ministry of Commerce & Industry
Foreign Trade (Regulation &

Development) Act, 1992
Directorate General Foreign Trade

(DGFT)

Foreign Trade policy to regulate
imports and encourage exports
Foreign Trade Policy is a set of guidelines or instructions issued by the Central Government
which specifies policy for exports and imports viz., foreign trade. It’s primary purpose is not
merely to earn foreign exchange, but also to stimulate greater economic activity.
FTP The provisions of FTP are governed by Foreign Trade (Regulation and
Regulates, Development) Act, 1992. The FTP is formulated, supervised and
Develops controlled by Directorate General of Foreign Trade (DGFT) & Regional
and Authorities (RA)
Promotes
internation
al trade Current FTP Contents of FTP are: [DGFT issues authorization i.e.
2023 is w.e.f permission to import and export]
1.04.23
Customs Act, Harmonized
1962 contains Basic policy + Handbook of
No end date system of
procedures, Export Procedures -
specified coding
valuation, Incentives Vol. I & II
for FTP [ITC(HS)]
consequences
2023
FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM 1

SEGMENT - 31
Import of
Goods which
“worked ivory
cannot be
and articles of
Prohibited imported/
ivory” falling
exported into
under HSN:
India
9601100
Goods which can Import of parts

be imported / of “nuclear
Restricted exported only reactors” falling
under an under HSN:
authorization 84014000
Imports or
exports
Goods which can Import of “Gas
Reserved for be imported / oil, including light
State Trading exported only by diesel oil” falling
Enterprises STE's i.e., IOC, under HSN:
ONGC, FCI 27101943
Goods which can Import of “three

be imported / wheeled Vehicles”
Free
exported without falling under
any authorization HSN: 87032230
ADMINISTRATION OF FTP:
Authorization – License required to import or export, issued by Director General of

Foreign Trade (DGFT) through its Regional Authorities (RA’s).
Directorate General of Foreign Trade (DGFT) – A final authority for interpretation

of policy (In case of dispute in implementation, DGFT overrides CBIC). DGFT may in
public interest pass such orders or grant such exemption, relaxation or relief, as it
may deem fit and proper, on grounds of genuine hardship and adverse impact on
trade to any person or class or category of persons from any provision of FTP or
any Procedures.
Settlement commission – Authority setup by department of revenue has been

empowered to settle matters of default in export obligation also.
Reserve Bank of India (RBI) – It works under ministry of finance and monitors
receipts and payments for exports and imports
Central Board of Indirect Taxes and Customs (CBIC) – Facilitate in implementing the
provisions of FTP. Customs department is responsible for clearances in line with
policy formed by DGFT. GST authorities to be involved in the matters relating to
export.
2 FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM

SEGMENT - 31
State GST departments – To avoid dual control, some taxable persons are under
the jurisdiction of state GST authorities. In their case, state GST authorities are
controlling authorities.
Policy interpretation Committee (PIC) - To aid and advice

DGFT
Norms Committee - For fixation/ modification of product

norms under all schemes
Export Promotion Capital Goods (EPCG) Committee - For

benefits w.r.to import of capital goods
Policy Relaxation committee (PRC) - For all other issues
Committee on Quality compliants and Trade disputes (CQCTD)

- For enquiring and investigating in all quality related

compliants falling under jusridction of respective Regional
authorities
Note: If an importer/exporter is aggrieved by any decision taken by PRC, or a

decision/order by any authority in the DGFT, a specific request for personal
hearing has to be made to DGFT, which may consider for relation after
consulting with all committees and the decision conveyed in pursuance to the
personal hearing shall be final and binding.
• Brain of international trade (To decide what to

FTP
import/export)
Customs, GST & • Body of international trade (To decide how to

other tax laws import/export)

SEGMENT - 31
National committee on Trade Facilitation (NCTF) – To facilitate coordination and

implementation of the trade facilitation agreement provisions.
Action plan
Improvement Reduction in Paperless Transparent

in ease of cargo release regulatory and Improved
doing business time environment predictable investment
legal regime climate
through better
infrastructure
Free passage of export consignment. No seizure, except in

exceptional cases
Single window system for export of perishable

agriculture produce
Niryat Bandhu Scheme for mentoring new and potential

exporters
DGFT online customer portal for

- E-RCMC (Registration cum membership certificate)
- E-COO (Certificate of Origin)
Trade
facilitation - Quality control and trade disputes
measures
IT initiatives to enable paperless, contactless and
transpatent environment for availing export benefits
24X7 help desk facility
Measures by customs department

- Single window interface for trade (SWIFT) to file all
documents at single point
- TURANT Customs for faceless assessment
- Compliance information portal - For all clearance
related procedures

SEGMENT - 31
Recognition under FTP 2023
Authorised Exonomic Towns of Export

Status Holder
Operator Excellence
Authorised Economic Operator (AEO)

Under AEO programme of Indian Customs, a business entity engaged in international
trade is granted AEO status if it is approved by Customs as compliant with supply
chain security standards based on World Customs Organization’s SAFE framework
Standards.
Such entities are considered as trusted trade partner of Indian customs.
AEO status holders get following benefits [Preferential BEDS]:

•Preferential customs treatment in terms of reduced examination and faster
processing and clearance of cargo
•Border clearance previleges in Mutual Recognition Agreement (MRA)

B partner countries
•Enhanced port delivery

E
•Deferred payment of customs duty

D
•Self Certification
S
Towns of Export Excellence (TEE):

• Selected towns which are contributing handsomely to India’s exports by
producing goods of specified amount may be granted recognition as TEE.
• They will be provided targeted support and infrastructure development to
maximize their export competitiveness and enable them to move up the value
chain andalso to tap new markets by granting specified privileges to them.

SEGMENT - 31
STATUS HOLDER = Exporter granted Status Certificate in terms of FTP.

Business leaders who have excelled in international trade and have successfully
contributed to India’s exports and also providing guidance to new entrepreneurs.
Export Performance criteria in terms Benefits to status holders

of FOB/FOR value in $ - Star Export
House (EH) [WIPES] [Made in India] [Exempted]
Warehouse licence to 2 star and

above
1 star EH = $ 3 million
Input Output Norms on priority i.e.

within 60 days by norms committee
2 star EH= $ 15 million Preferential treatement and priority

in handling
Exports free of cost (Except gems &

3 star EH= $ 50million gold jewellery)
Self declaration w.r.to authorization

and customs clearances
4 star EH= $ 200 million
"Made in India" self certification for 3
star and above
Exempted from furnishing bank

5 star EH= $ 800 million guarantee & compulsory negotiation
of documents*
*After shipment of goods, exporter has to negotiate the documents through a bank
within 21 days from the date of shipment. Submission of relevant documents to the
bank and the process of obtaining payment is called “Negotiation of documents”.
How to compute Export Performance???

✓ Status recognition depends upon export performance.
✓ All exporters of goods or services having an IEC shall be eligible for recognition.
✓ Export performance is counted on the basis of FOB value of export proceeds
realized in free foreign exchange or in Indian rupees1, during current and
previous three financial years.2
1 In case of deemed export, FOR value of exports in Indian rupees shall be converted in $ at the
exchange rate notified by CBIC, as on 1st April of each financial year
2 However for Gems & Jewellery Sector, the performance during current and previous two years
shall be considered for recognition as status holder.

SEGMENT - 31
✓ For granting status, export performance is necessary in all the three preceding
financial years.
✓ Export performance in not transferrable among IEC holders
✓ Exports made on re-export basis shall not be counted for recognition.
✓ Export of items under authorization, including SCOMET3 items, would be
included for calculation of export performance.
✓ For calculating export performance for grant of One Star Export House Status
category, exports by following IEC holders shall be granted double weightage
once in any of these categories
o Micro and Small Enterprises,
o manufacturing units having ISO/BIS certification,
o units located in Northeastern States including Sikkim and Union Territories
of Jammu,
o Kashmir and Ladakh and
o export of fruits and vegetables
Skilling and mentorship obligations of Status Holders - Status Holders (other than

One Star Export House) are being made “partners” in providing mentoring and
training in international trade to specified number of trainees each year based on
status they achieve.
SCOMET: SPECIAL CHEMICALS, ORGANISMS, MATERIALS, EQUIPMENT AND

TECHNOLOGIES
Use in weapons of mass destruction
Export of dual use items
Use in civilian/ industrial applications
Either prohibited (or) Restricted

Eg: Nuclear materials, Toxic chemical agents, Aero space systems etc.,
DEVELOPING DISTRICTS AS EXPORT HUBS:
Every district has products and services which are being exported, and can be
further promoted, along with new products/ services, to increase production,
grow exports, generate economic activity and achieve the goal of Atma Nirbhar
Bharat, Vocal for local and Make in India.
3
Special Chemicals, Organisms, Materials, Equipment and Technologies

SEGMENT - 31
District Export District Export

Promotion Action Plan
Committee (DEAP)
(DEPC) Products/ •DGFT will
State Export •Support for services take
Promotion export identification forwards this
Committee promotion & which are initiative in
(SEPC) address potential for each district
bottlenecks export
for export
growth in
districts
REGISTRATIONS UNDER FTP:
Import Export Code (IEC) – An identification number (Which is nothing but PAN
of the person), without which import and export is not permitted , unless
exempted. IEC details have to be electronically updated every year, even if there
are no changes, failing which it will be deactivated till updation.
State Trading Enterprises (STE) - certain goods can be imported/exported only

through ‘State Trading Enterprises’ notified by DGFT. State Trading Enterprises
(STEs) are governmental/non- governmental enterprises, including marketing
boards, which deal with goods for export and /or import. However, DGFT has the
discretion to issue authorization to other entities to import or export goods that
are notified for exclusive trading through STEs.
Export Promotion Councils (EPCs) - organizations of exporters, set up to promote

and develop Indian exports. Each Council is responsible for promotion of a particular
group of products/ projects/services. EPCs shall issue Registration-cum-
Membership Certificate (RCMC). RCMC is required to be furnished by any person,
applying for an Authorisation or for any other benefit or concession under FTP.

SEGMENT - 31
SPECIFIC PROVISIONS RELATING TO IMPORT AND EXPORT:
1. Samples
Import Export
- Defence/Security
items Other goods Trade and technical samples
- Seeds
- Bees
- New drugs Restricted goods Freely exportable
goods
Freely importable
(Even if otherwise
Requires restricted)
Requires Allowed without
authorisation authorisation

any limit
Note: Duty free import of samples (Without payment of customs duty) upto
`3,00,000 for all exporters shall be allowed.
2. Import/ Export of Gifts
In case of import of In case of export of

gifts gifts
through post/ Restricted Freely

courier (incl. E Other exportable goods
modes goods
Commerce)
Value upto Value >
Other ₹ 5,00,000 in ₹ 5,00,000 in
Rakhi, Life Authorization
goods Authorization required a FY a FY
saving
not required
medicines
Prohibited No Authorizatio
authorization n required
Does not required
require
authorization*
*Customs duty payable on gifts imported. However, if CD on Rakhi is upto `100 then
it is exempted.

SEGMENT - 31
3. Passenger Baggage - accompanied (or) unaccompanied within 1 year

before or after passengers departure/arrival
Import of baggage Export of baggage
Freely
Restricted Freely Restricted exportable
goods importable goods goods
goods
- Household goods & Other Authorization

Authorization not required
personal effects goods Authorization required
- Drawings, patterns not required
& other notified
goods for export in Authorization

the baggage of required
exporter coming
from abroad
Does not require

authorization*
4. Import of Second hand goods
Capital goods Other than capital goods
- Air conditioners Other capital goods

Imported for remaining
- Generator sets the purpose of goods
- Desktop Reconditioned, Remaining repair/
- Refurbished/ refurbished second hand refurbishing/
reconditioned spares of such capital reconditioning
goods Requires
spares of goods
authorization
computers/
laptops Authorization
Authorization
- Notified not required not required
No restriction (i.e.
electronic goods Freely importable).
But, a certificate is
required from
Restricted (i.e. Chartered Engineer
Require that it has atleast
authorization) 80% of residual life
of original spares
Note: Goods (incl. Capital goods) used abroad for atleast 1 year, can be imported
without any authorization, even if such goods are otherwise restricted.

SEGMENT - 31
5. Prototypes: New / second hand prototypes / second hand samples may be

imported without an Authorisation on the following conditions:
❑ The importer is an Actual User (industrial)
❑ He is engaged in production of, or having industrial license / letter of intent
for research in an item for which prototype is sought for product development
or research, as the case may be,
❑ The importer files a self-declaration to that effect, to the satisfaction of
Customs authorities.
6. Metallic waste & scrap: Import of any form of metallic waste, scrap will be
subject to the condition that it will not contain hazardous, toxic waste, radioactive
contaminated waste / scrap containing radioactive material, any type of arms,
ammunition, mines, shells, live or used cartridge or any other explosive material in
any form either used or otherwise.
7. Import for export

Freely importable Restricted for import
Freely exportable Restricted for export Freely Restricted for

exportable export
Authorization not
Authorization not Authorization
required for import, Authorization
required for import, required for
if exported in same required for
if exported in same import
or substantially same import and
or substantially form export
same form
CD not payable
[Imported under CD payable in
Goods kept in bond & exported
bonded warehouse & import &
CD not payable against
exported without exported against
[LUT/Bond to be convertible
payment of CD convertible
executed with foreign exchange] foreign exchange
customs]

SEGMENT - 31
Import
Export
8. Imported goods
(or) Indigenous goods Re-import
Export for repairs/
testing/ quality
Restricted goods -
improvement/
Requires
upgradation
authorization
Freely importable -
Authoirzation not
required
Miscellaneous provisions w.r.to imports/exports:

9. Authorization – Import/export of restricted goods is possible only through
authorization (i.e., licence) obtained through DGFT using applicants IEC. Usually, such
authorization is with actual user condition (i.e., only importer of such goods should
use), unless it is specifically dispensed with.
10. Mandatory documents to be filed:

Import Export
1. Bill of Entry 1. Shipping bill/ Bill of export
2. Document of title:
Vessel – Bill of lading
Aircraft – Airway Bill
Vehicle – Lorry receipt/railway receipt
Post – Postal receipt
3. Commercial invoice cum packing list (or separate invoice and packing list)
11. Import of capital goods under lease financing does not require any specific
permission from DGFT
12. Merchanting trade:

Seller Intermediary Buyer
• Outside India • India • Outside India
 Shipment do not touch Indian ports

 This is allowed subject to RBI guidelines
 All goods are allowed, other than SCOMET, Specimens of wild animals and
plants covered under CITES (Convention on international trade in
Endangered species)

SEGMENT - 31
13. In case of import of goods without payment of customs duty or at

concessional rate, bank guarantee/bond/LUT to be executed with customs.
However, for domestic procurement without payment of GST, it is to be executed
with regional authority.
14. Benefits to supporting manufacturers and third-party exports:
Merchant Exporter •If Peach

•Peach Industries Industries Ltd.
Ltd. and Golden globe
•Golden Globe EXIM name
•Manufacture's
EXIM mentioned in
goods
•Export's goods documents (i.e.,
tax invoice,
Supporting shipping bill etc.,)

Manufacturer
Benefits under FTP
extended to both
Third party •Export

Exporter documents (i.e.,
•Turbojet (P) Ltd. shipping bill/bill
•On whose behalf of export) shall
goods are •Peach Industries
Ltd. indicate both
exported names. However,
•Manufacture's BRC, export
and Export's order and invoice
goods should be in the
Beneficial owner
anme of Peach
Industries Ltd.
Benefits under FTP
extended to both

SEGMENT - 31
VARIOUS EXPORT PROMOTION SCHEMES:
Duty
Exemption
Schemes -
AA & DFIA
Duty
Deemed Remission
Exports Schemes -
DBK
Export
promotion
schemes
RODTEP -
Free Trade Rebate of
Zones - EOU, duties and

EHTP, STP taxes on
and BTP Export exported
promotion products
Capital
goods
Scheme
(EPCG)
AA V. DFIA – FOR PROCUREMENT OF GOODS WITHOUT PAYMENT OF DUTY:
Basis of Difference Advance Authorization (AA) Duty Free Import

Authorization (DFIA)
1. Transferability AA is subject to actual user DFIA is transferable after
of authorization condition which cannot be completion of export
transferred obligation
2. Outward supply ✓ Physical export (Incl. supply Only Export
to SEZ)
✓ Deemed Export under FTP
✓ Supply as stores to foreign
going vessel or aircraft
3. Minimum value Minimum VA = 15% (However, in Minimum VA = 20%
addition required case of specified goods, it can be
for outward less than 15%)
supply.
4. Eligibility - An exporter Any exporter
(manufacturer or (manufacturer or
merchant), who holds merchant)
Authorized Economic
Operator Certificate
- A status holder with 2-
star or above status,
SEGMENT - 31
subject to approval by
DGFT
5. Fixation of AA can be issued even if SION for DFIA can be issued only if
Standard Input that product is not fixed, based SION has been fixed for
SION on self-declaration the product to be
exported.
6. Duties that are All duties (incl. IGST and GST Only BCD payable in
exempt Comp. Cess) payable on imports imports under DFIA is
under AA are exempted. exempted.
7. Applicability of Only manufacturer – Exporter A merchant exporter
authorization. or merchant exporter tied to even though not tied to
supporting manufacturer is supporting
eligible for AA. (In case of manufacturer is eligible
pharmaceutical products it shall for DFIA. However, they
be issued to manufacturer need to mention name
exporter only) and address of
supporting
manufacturer in export

documents.
8. When available? - Imported inputs are subject It shall be issued on post
to pre import condition and export basis based on
they should be physically exports made, which is
incorporated in the export useful for subsequent
product (making normal imports
allowance for wastage).
- In case of local
procurement, the inputs
shall be procured prior to
manufacture of export item
and shall be physically
incorporated in the export
product.
9. When it is not The scheme is not available for  No DFIA shall be
available? the specified export products as issued for an input
well as specified inputs. which is subject to
pre-import condition
or where SION
prescribes ‘Actual
User’ condition or
certain other
specified inputs with
pre import condition
 Import of Tyre

SEGMENT - 31
10. Validity? Deemed Exports: 12 months from the date

Co-terminus with contracted of issue (No further
duration of the project or 12 revalidation)
months, whichever is later.
Other cases:
12 months from the date of issue
(Revalidation for further 12
months only once)
11. Export obligation 90 days from the date of 12 months from the date
period clearance of import of online filing of DFIA
consignment (No further application and
extention) generation of file number
Common Provisions applicable to AA & DFIA:

Accounting of - Where SION permits use of either (a) a generic input or
Input (b) alternative input, the name/description of the input
used (or to be used) in the Authorization must match
exactly with the name/description endorsed in the
shipping bill.
- At the time of discharge of export obligation (issue of
EODC) or at the time of redemption, Regional Authority
shall allow only those inputs which have been specifically
indicated in the shipping bill together with quantity.
- The above provisions will also be applicable for supplies to
SEZs and supplies made under Deemed exports.
Importability / Prohibited items – Not allowed unless separately notified.
Exportability of Reserved for STE – Import not allowed without Advance
items that are Release Order (ARO), or Invalidation Letter. Export only after
Prohibited/ obtaining a ‘No Objection Certificate’ from the concerned STE.
Restricted / STE Restricted items – Import allowed unless specifically
disallowed. Export of restricted / SCOMET items however,
shall be subject to all conditionalities or requirements of
export authorization or permission.
Domestic Holder of an AA / DFIA can procure inputs from indigenous
Sourcing of supplier/ State Trading Enterprise/EOU/EHTP/BTP/ STP in
Inputs lieu of direct import.
Such procurement can be against Advance Release Order
(ARO), or Invalidation Letter.

SEGMENT - 31
Currency for Export proceeds shall be realized in freely convertible

Realisation of currency or in Indian Rupees, except otherwise specified.
Export Proceeds.
Re-import of Goods exported under AA/ DFIA may be re-imported in same
exported goods or substantially same form subject to the conditions.
Advance Authorization for Annual Requirement and Eligibility Conditions:

 Advance Authorization for Annual Requirement shall only be issued for items
notified in SION and it shall not be available in case of adhoc norms under
Self-Declared Authorizations where SION does not exist.
 Advance Authorization for Annual Requirement shall also not be available in
respect of SION where input is notified.
 Exporters having past export performance (in at least preceding two
financial years) shall be entitled for Advance Authorization for Annual
requirement.

 Entitlement in terms of CIF value of imports shall be upto 300% of the FOB
value of physical export and / or FOR value of deemed export in preceding
financial year or Rs 1 Crore, whichever is higher.
FULFILMENT OF EXPORT OBLIGATION:
• For the purpose of duty exemption and remission schemes, Value Addition
(VA) shall be calculated as follows: -
• Value Addition = A – B/B X 100
• where:
• A = FOB value of export realized (In case of actual exports)/ FOR value
received (In case of deemed exports)
• B = CIF value of inputs covered by Authorization, plus any other imported
materials used on which benefit of DBK is claimed or intended to be claimed.
• Note: In case of free of cost material supplied by foreign buyer, notional value
of material (notional CIF as declared before Customs) shall be added to the
CIF value and also to FOB value to arrive at the value addition.

SEGMENT - 31
Illustration - 1:
CIF value of Input = `2,50,000 & Fob Value of export = `3,25,000 whether VA
delivered under AA?
3,25,000 - 2,50,000
×100 = 30%  VA Achieved
2,50,000
Illustration - 2:
If FOB value of export is ` 4,80,000, what should be CIF value of import to achieve
VA under DFIA?
CIF Value of import + 20% = FOB value of export
1.2 x CIF value of import = `4,80,000
4,80,000
 CIF Value of import = 1.2 = `4,00,000
Illustration - 3:
If FOB value of export in ` 8,00,000 & goods freely supplied by recipient outside
India with a national cost of ` 2,00,000, what should be CIF value of other imports
if VA under AA to be achieved?
CIF value of import x 115% = FOB value of export
(X + `2,00,000) x 115% = `8,00,000 + `2,00,000
X + `2,00,000 = `10,00,000 / 1.15 = `8,69,565
X = `8,69,565 – `2,00,000 = `6,69,565
REMISSION OF DUTIES AND TAXES ON EXPORTED PRODUCTS (RODTEP) SCHEME:

 Refund to exporters central, state and local duties/taxes that were so far not
being rebated/refunded (Eg: Corporation tax, municipal tax, mandi tax, Local
body tax, garbage tax etc.,)
 Refund credited to Electronic Duty Credit ledger through e-Scrip, maintained
under Sec. 51B of Customs Act, 1962 which can be used only for payment of
Basic Customs Duty on import (or) can be transferred to other importers
 The rebate under the scheme shall not be available in respect of duties and taxes
already exempted or remitted or credited.
 Under the scheme, a rebate would be granted to eligible exports at a notified
rate as a % of FOB value with a value cap per unit of the exported product,
wherever required, on export of items which are categorized under the notified
8 digit HS code. However, for certain export items, a fixed quantum of rebate
amount per unit may also be notified.
 The rebate allowed is subject to the receipt of sale proceeds within time allowed
under the FEMA, 1999 failing which such rebate shall be deemed never to have

SEGMENT - 31
been allowed. The rebate would not be dependent on the realization of export
proceeds at the time of issue of rebate.
 If the sale proceeds are not realized within the time allowed under FEMA, then
the rebate granted shall be recovered from the person to whom the rebate is
granted, even if such duty credit is transferred to any person.
 Ineligible supplies/Items/Categories under the scheme:
(i) Export of imported goods
(ii) Exports through transhipment
(iii) Exported goods subject to minimum export price or export duty
(iv) Restricted goods for export as per ITC (HS)
(v) Prohibited goods for export as per ITC (HS)
(v) Deemed Exports
(vii) Supplies of products manufactured by DTA units to SEZ/FTZ units
(viii) Products manufactured by 100% EOU/EHTP/BTP/Customs bonded
warehouse/SEZ/FTZ

(ix) Products manufactured or exported in discharge of export obligation
against AA (or) DFIA
EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME:
• What is this scheme about? Export Promotion Capital Goods Scheme (EPCG)
permits exporters to procure capital goods at zero customs duty or procure
them indigenously without payment of GST[Deemed Exports under GST]. In return,
exporter is under an obligation to fulfill the export obligation.
Note: Exemption w.r.to IGST & GST comp. cess on import.
• Who are eligible?

o Manufacturer exporters with or without supporting manufacturers
o Merchant exporters tied to supporting manufacturer
o Service providers including service providers designated as Common Service
Provider (CSP) subject to prescribed conditions
• Meaning of capital goods:

o “Capital Goods” means any plant, machinery, equipment or accessories
required for manufacture or production, either directly or indirectly, of
goods or for rendering services, including those required for
replacement, modernisation, technological up-gradation or expansion.

SEGMENT - 31
o Capital goods may be for use in manufacturing, mining, agriculture,

aquaculture, animal husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture and viticulture as well as for use in services sector.
o The license holder can either procure the capital goods (whether used for
pre-production, production or postproduction) from global market or
domestic market.
o Restricted capital goods shall be imported only after requisite approval.
o Capital Goods including capital goods in CKD/SKD condition are eligible
o Computer systems and software which are a part of the Capital Goods
being imported are eligible
o Spares, moulds, dies, jigs, fixtures, tools, refractories & Catalysts for initial
charge plus one subsequent charge, are also eligible
o Import of capital goods shall be subject to actual user condition till export
obligation is completed. After export obligation is completed, capital goods
can be sold (or) transferred.
• Export obligation? Export obligation means obligation to export products

covered by authorization/ permission in terms of quantity or value or both, as
may be prescribed/specified by regional or competent authority. Export
obligation (EO) consists of specific export obligation and average export
obligation. Specific EO is over and above average EO (Therefore first average EO
should be met and then Specific EO should be met)
Export Obligation
Specific Export Obligation Average Export Obligation
It is equivalent to 6 times of duty saved It is the average level of exports made by

on capital goods imported under EPCG the applicant in 3 preceeding licencing
Scheme years for the same and similar products
Duty saved shall be, In case of direct It has to be achieved within the overall
imports, actual duty saved amount. In export obligation period (including extended
case of domestic sourcing, notional period, unless otherwise specified)
Customs duty saved on FOR value.

SEGMENT - 31
• Validity of authorization: Valid for import for 24 months from the date of issue
of authorization. Revalidation shall not be permitted.
Special points w.r.to export obligation:

 The Average Export Obligation (AEO) shall be fulfilled every financial year,
till export obligation is completed. Exports/supplies made over and above
AEO shall only be considered for fulfillment of Export Obligation.
 EO shall be fulfilled by the authorisation holder through export of goods
which are manufactured by him or his supporting manufacturer / services
rendered by him, for which the EPCG authorisation has been granted. Exports
can be direct or through third parties.
 In case of indigenous sourcing of capital goods, Specific EO shall be 25%
less than the EO mentioned above, i.e. EO will be 4.5 times (75% of 6 times)
of duty saved on such goods procured. There shall be no change in average
EO imposed, if any
 Exports under Advance Authorisation, DFIA, Duty Drawback, RoSCTL and

RoDTEP Schemes would also be eligible for fulfilment of EO under EPCG
Scheme
 Exports made from DTA units shall only be counted for calculation and/or
fulfillment of AEO and/or EO
 EO can also be fulfilled by the supply of Information Technology
Agreement (ITA-1) items to DTA, provided realization is in free foreign
exchange
 Both physical exports as well as specified deemed exports shall also be
counted towards fulfilment of export obligation
Illustration - 4:
Duty saved on import of capital goods = `20,00,000 → Specific EO = 80,00,000

EPCG granted on 1/04/2023. Determine whether export obligation is achieved based
on the following information pertaining to exports for various years:
2019 2020 2021 2022 2023 2024
`10 lakhs `40 lakhs `20 lakhs `50 lakhs `45 lakhs `60 lakhs
2025 2026 2027 2028 2029 2030
`55 lakhs `55 lakhs `80 lakhs `90 lakhs `80 lakhs `75 lakhs

SEGMENT - 31
6 years Actual Average of 3 Amount Cumulative

from the Exports (i) preceding years (ii) towards amount
date of Specific EO towards
EPCG (iii) = (i) – (ii) specific EO
2023 `45 lakhs 40+20+50
= 36.67 lakhs 8.33 lakhs 8.33 lakhs
3
2024 `60 lakhs 20+50+45
= 38.33 lakhs 21.67 lakhs 30 lakhs
3
2025 `55 lakhs 50+45+60
3
2026 `55 lakhs 45+60+55
3
2027 `80 lakhs 60+55+55
3
2028 `90 lakhs 55+55+80
3
In the present case, both average EO and Specific EO is achieved and they will get
export obligation discharge certificate.
EXPORT PROMOTION ZONES SCHEME:
What are the 1. EOU – Export Oriented Unit

notified areas? 2. EHTP – Electronic Hardware Technology Park
3. STP – Software Technology Park
4. BTP – Bio Technology Park
Objective To promote exports, enhance foreign exchange
earnings, attract investment for export production
and employment generation.
Units Covered under  All units OTHER THAN TRADING UNITS are covered
the Scheme? under this Scheme
 Majorly exports of goods or services, other than
prohibited (Except permissible sales in DTA)
Applications & Application for setting up an EOU shall be considered
Approvals/Letter by Unit Approval Committee (UAC)/ Board of Approval
of Permission (BoA) as the case may be.
(LOP)/ Letter of
Intent (LOI)
What is the validity Once unit commences production, LOP/LOI issued shall be
of LoP/LoI valid for a period of 5 YEARS for its activities. This period
may be EXTENDED further by DC for a period of 5 YEARS
at a time.

SEGMENT - 31
Tax Implications
Note: Exemption w.r.to IGST & GST comp. cess on import

Other entitlements  Exemption from industrial licensing for
manufacture of items reserved for micro and small
enterprises.
 Export proceeds will be realized within 9 months.
 Units will be allowed to retain 100% of its export
earnings in the EEFC (Exchange Earners' Foreign
Currency) account.

SEGMENT - 31
 Unit will not be required to furnish bank guarantee

at the time of import or going for job work in DTA
subject to fulfilment of specified conditions.
 100% FDI investment permitted through automatic
route similar to SEZ units
Inter unit transfer Transfer of manufactured goods/capital goods from one
EOU/ EHTP/STP/BTP unit to another EOU / EHTP/ STP/
BTP unit is allowed on payment of applicable GST and
compensation cess with prior intimation to concerned
Development Commissioners of the transferor and
transferee units as well as concerned Customs authorities
as per the specified procedure.
Goods supplied by one unit to another unit shall be treated
as imported goods for second unit for payment of duty, on

DTA sale by second unit.
Who can establish  Only projects having a minimum investment of ₹ 1
EOU? Crore in P&M shall be considered for establishment as
Is there any EOUs. However, this shall not apply to existing units
investment criteria? and units in EHTP/ STP/ BTP, Handicrafts/
Agriculture/ Floriculture/ Aquaculture/ Animal
Husbandry/ Information Technology, Services, Brass
Hardware and Handmade Jewellery sectors.
 BoA (Board of Approval) may also allow establishment
of EOUs with a lower investment criteria.
Conversion of DTA Existing DTA units may also apply for conversion into an
into EOU? EOU / EHTP / STP/ BTP unit. Existing EHTP / STP units
may also apply for conversion / merger to EOU unit and
vice-versa. In such cases, units will avail exemptions in
duties and taxes as applicable.
Net Foreign In a period of 5 years EOU units have to achieve a positive
Exchange Earning NFE Earning cumulatively. Such period of 5 years can be
(NFE) condition extended in specified cases.
Exit from scheme With approval of DC/Designated officer of EHTP/
STP/BTP, an EOU/EHTP/STP/BTP unit may opt out of
scheme.
Such exit shall be subject to payment of applicable excise
and customs duties and on payment of applicable IGST/
CGST/ SGST/ UTGST and compensation cess, if any, and
industrial policy in force.
If unit has not achieved obligations, it shall also be liable to
penalty at the time of exit.

SEGMENT - 31
V. DEEMED EXPORTS:
Objective: Indian manufacturers are treated on par with foreign suppliers, to

promote make in India initiative (i.e., Rather than purchasing from foreign
suppliers, purchases can be made from Indian manufacturers)
Underlying theory: Foreign Exchange Saved = Foreign Exchange earned
Consideration: Either in Indian Rupees (`) or Free foreign exchange
Categories of supplies considered as deemed export:
Supplies to domestic Supplies to projects/

entities who can import purposes that involve Supplies to
their requirements duty international infrastructure projects
free or at reduced rates competitive bidding of national importance
of duty (ICB)
Projects financed by

Supply of goods
agencies notified by Mega power projects
against AA
Department of
Economic Affairs
(DEA), under ICB.
Supply of goods to
Nuclear projects
EOU/EHTP/STP/BTP
Any project covered
under ICB, where
Supply of capital imports are Projects financed by
goods against EPCG permitted at zero UN or international
authorization customs duty organisations
Benefits for Deemed Exports:

Deemed exports shall be eligible for any/all of following benefits in respect of
manufacture and supply of goods, qualifying as deemed exports
(a) Advance Authorization (AA)/Advance authorization for annual requirement/
Duty Free import authorization (DFIA) – Import without payment of customs
duty, as per the scheme
(b) Deemed Export Drawback – Refund of customs duty paid on import
(c) Refund of terminal excise duty for specified excisable goods – Refund of excise
duty (i.e., CVD) paid on import

SEGMENT - 31
Conditions for deemed exports:

 Supplies shall be made directly to entities listed above. Third party supply
shall not be eligible for benefits/exemption.
 In all cases, supplies shall be made directly to the designated
Projects/Agencies/Units/ Advance Authorization/ EPCG Authorization
holder. Sub-contractors may, however, make supplies to main contractor
instead of supplying directly to designated Projects/ Agencies. Payments in
such cases shall be made to sub-contractor by main-contractor and not by
project Authority.
 Supply of domestically manufactured goods by an Indian Sub- contractor to
any Indian or foreign main contractor, directly at the designated project’s/
Agency’s site, shall also be eligible for deemed export benefit

SEGMENT - 31

SEGMENT - 31
PENAL ACTION AND PLACING OF AN ENTITY IN DENIED ENTITY LIST:

Penal action
In following situations, a person shall be liable to penal action under FT (D&R) Act
and rules and orders made thereunder, FTP and any other law for time being in
force:
(i) Authorization holder:
• violates any condition of such Authorization
• fails to fulfill export obligation
• fails to deposit the requisite amount within the period specified in demand
notice
(ii) any information/particulars furnished by applicant subsequently found
untrue/incorrect [With a view to raising ethical standards and for ease of doing business, DGFT has
provided for self-certification system under various schemes in FTP. In such cases, applicants is expected to
undertake self-certification with sufficient care and caution in filling up information/ particulars]
Denied Entity List (DEL)

A firm may be placed under DEL, by the concerned Regional Authority (RA) of the
DGFT.
In such a case:
(i) firm may be refused grant or renewal of a
licence/authorization/certificate/scrip/any instrument bestowing
financial/fiscal benefits, and
(ii) all new licences, authorizations, scrips, certificates, instruments etc. will
be blocked from printing/ issue/renewal.
A firm’s name can be removed from DEL, by the concerned RA for reasons if the
firm completes Export Obligation/ pays penalty/ fulfils requirement of demand
notice(s) issued by the RA/submits documents required by the RA.

FTP 2023

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

FTP 2023

Uploaded by

Copyright:

Available Formats

“RE-WISE” GST & CUSTOMS

Ministry of Commerce & Industry

Foreign Trade (Regulation &

Directorate General Foreign Trade

FOREIGN TRADE POLICY

FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM 1

Goods which can Import of parts

ONGC, FCI 27101943

Goods which can Import of “three

Authorization – License required to import or export, issued by Director General of

Directorate General of Foreign Trade (DGFT) – A final authority for interpretation

Settlement commission – Authority setup by department of revenue has been

2 FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM

Policy interpretation Committee (PIC) - To aid and advice

Norms Committee - For fixation/ modification of product

Export Promotion Capital Goods (EPCG) Committee - For

Policy Relaxation committee (PRC) - For all other issues

Committee on Quality compliants and Trade disputes (CQCTD)

FOREIGN TRADE POLICY

Note: If an importer/exporter is aggrieved by any decision taken by PRC, or a

• Brain of international trade (To decide what to

Customs, GST & • Body of international trade (To decide how to

FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM 3

National committee on Trade Facilitation (NCTF) – To facilitate coordination and

Improvement Reduction in Paperless Transparent

Free passage of export consignment. No seizure, except in

Single window system for export of perishable

Niryat Bandhu Scheme for mentoring new and potential

DGFT online customer portal for

24X7 help desk facility

Measures by customs department

4 FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM

Recognition under FTP 2023

Authorised Exonomic Towns of Export

Authorised Economic Operator (AEO)

AEO status holders get following benefits [Preferential BEDS]:

FOREIGN TRADE POLICY

•Border clearance previleges in Mutual Recognition Agreement (MRA)

•Enhanced port delivery

•Deferred payment of customs duty

Towns of Export Excellence (TEE):

FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM 5

STATUS HOLDER = Exporter granted Status Certificate in terms of FTP.

Export Performance criteria in terms Benefits to status holders

Warehouse licence to 2 star and

Input Output Norms on priority i.e.

2 star EH= $ 15 million Preferential treatement and priority

Exports free of cost (Except gems &

Self declaration w.r.to authorization

Exempted from furnishing bank

How to compute Export Performance???

shall be considered for recognition as status holder.

FOREIGN TRADE POLICY

SCOMET: SPECIAL CHEMICALS, ORGANISMS, MATERIALS, EQUIPMENT AND

Use in weapons of mass destruction

Export of dual use items

Use in civilian/ industrial applications

Either prohibited (or) Restricted

DEVELOPING DISTRICTS AS EXPORT HUBS:

FOR BOOKS & VIDEOS VISIT WWW. THARUNRAJ.COM 7

District Export District Export

REGISTRATIONS UNDER FTP: